The final quarter of 2024 is here, and with that, high expectations for the massive bull run will melt the faces with new all-time highs (ATHs) for Bitcoin, altcoins, and meme coins. But are we really in for a good time ahead or will it be a pain of price drops and sideways action?
Well, to determine that, we have to take a deeper look into all that’s going on in the crypto space. So, let’s see!
The Best September for BTC Marks a Green Q3
The trillion-dollar cryptocurrency started 2024 on a great note, rising all three months of Q1 to record 68.68% returns in the entire quarter, according to CoinGlass. This was followed by a red Q2, recording 11.92% losses.
While Q3 has been green, the gains have been a mere 0.96%. However, it brought us Bitcoin’s strongest September yet.
The price of BTC jumped 7.29% last month, the most BTC has ever had in the last 13 September that Bitcoin has had. Of these 12 September, eight have been red, bringing the average returns to the month at negative 3.77%.
But with a green September, BTC/USD is now trading at $64,000, down 13.3% from its peak of $73,740 hit in mid-March. Prior to the weekend, BTC/USD went up to $66,500, amidst monetary easing policies worldwide and institutional investments, before dumping this week just as US equity indexes did.
These losses came after Shigeru Ishiba, seen as a monetary policy hawk, was selected as Japan’s new prime minister. However, he is of the view that “monetary policy must remain accommodative as a trend.”
Interestingly, late in July, the Bank of Japan (BOJ) had a modest rate hike, which triggered an unwinding of the risk-on trades. The global panic in markets, which also saw BTC drop from about $65K to $50K in a matter of a few days, had the central bank reassuring that there won’t be any more hikes this year.
The bigger news, however, came from the US Federal Reserve Chair Jerome Powell on Monday, who crashed market expectations that future rate cuts will be as aggressive as the recent 50 basis point cut.
A Fresh Wave of Capital Ready to be Injected
The first-rate cut in four years, which sent the BTC price on an uptrend, came from the Fed two weeks ago, which lowered the federal funds rate to the 4.75%-5% range.
Lower US rates typically lead to a weakening US Dollar, and with USD being the primary quote asset for BTC, it leads to higher prices for the largest crypto asset. Also, by making holding cash less attractive and stimulating the economy, it moves investors into riskier assets like Bitcoin.
Around the same time, China also announced its biggest monetary and fiscal stimulus since the pandemic to help boost the country’s economy and markets. The unveiling of the broader-than-expected package came last week that offers rate cuts and more funding to help the world’s second-largest economy achieve its growth target.
The People’s Bank of China (PBOC) has also introduced new tools to boost the capital market. This includes a swap program the size of an initial 500 billion yuan that will allow brokers, funds, and insurers easier access to funding to buy stocks and as much as 300 bln yuan in cheap loans to banks so that they can fund share purchases and buybacks of other entities.
Given that Chinese traders are known for their high-risk tolerance, increased demand from Chinese traders is expected to send crypto prices higher in the long run.
Meanwhile, in the US, Powell has disappointed the hopes of many investors that the Fed would implement yet another steep half-point rate reduction before the year ends.
“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance,” said Powell, noting that there’s no preset course and the decisions will be made “meeting by meeting.”
Rate cuts are still in the pipeline, though, just at a measured pace to support an economy, which Powell says is healthy.
“Overall, the economy is in solid shape. We intend to use our tools to keep it there.”
– Powell
The Fed’s next rate decision will be its November policy meeting, which will come right after the presidential election. According to prediction market Polymarket, betters are giving a 25 bps rate cut in November, a 63% chance of happening. CME FedWatch, meanwhile, puts it at almost 40%.
So, Uptober or Rektober?
Amidst the bullish news, September, which has been historically a bearish month, turned out to be green this time and that bodes well for October. This is because every green September has led to a green October.
This isn’t even all. October is actually one of the strongest months for Bitcoin historically. And this is what has earned it the nickname “Uptober.”
Data from Coinglass shows that 9 times out of 11 since 2013, BTC has posted positive returns in October with the highest upside of 60.79% during the bull market of 2013 followed by 47.8% gains during yet another bull market of 2017 and then almost 40% returns in the 2021 bull run.
In contrast to small average losses in September, October sees average gains of 21%. And the three times September was green, the entire next quarter (October, November, and December) brought higher prices.
This certainly presents a bullish view for Bitcoin, which may finally make a new ATH and before the quarter is over, a six-figure price for BTC is not so out of the picture either.
But given that “Uptober” is so widely known and expected, could it end up being the absolute opposite, i.e., ‘Rektober.’ Historical price action says that’s unlikely to happen, but Charlie Morris, founder of investment manager ByteTree, presents a contrarian view.
He calls for caution for believing in a “too popular” idea “because popularity means the money is already invested ahead of the event,” he wrote in a report. He also pointed out that the BTC price has historically consolidated for about 6 months post halvings before climbing to new highs.
If Bitcoin holds that pattern, that would mean, new ATHs will be coming around at the end of this month.
According to Kaiko, even the options market is seeing a risk-on positioning as traders get ready to capture the upside ahead of “BTC’s best trading month.” The fact that traders are piling into the options market while volume is slow to rise in the spot market means that the recent rally might be “driven by more sophisticated traders,” it noted.
With the Fed’s jumbo rate cut and two more expected before the year’s end, risk-on sentiments have already been boosted. This has prompted trades on December 27 contracts with significant volume on strike prices above $100k.
However, the crypto data provider notes that the effect of cheaper dollars hasn’t yet shown up in the markets. Given that global liquidity lags the markets, the effects of the easing cycle will take longer to appear.
Amidst this, the US elections in November present a big upcoming event, not just for crypto markets but the global stock markets, that is bound to bring volatility with it.
This has some traders positioning for weakness in the coming weeks. With BTC price trading below $65K, Jake Ostrovskis, OTC trader at crypto market maker Wintermute says:
“The volatility surface indicates a bias toward the downside until late October and November.”
This is when “the market begins to favor calls over put protection,” as per Ostrovskis, who sees “a post-election rally.”
As the US elections approach fast, PoliFi tokens that have a collective market cap of over $700 mln are enjoying an uptrend with TRUMP up 81.6%, TREMP 40%, and KAMA 64% in the last 7 days. Even BODEN jumped 76.5%.
But Is the Retail Here Yet?
With crypto prices experiencing a nice upside, the question in everyone’s mind is, is retail here? Well, the answer is not yet.
To check retail participation, an important indicator we should look at is the rank of the leading US-based crypto exchange, Coinbase (COIN +0.08%), in the app store. For instance, during the previous two bull markets, 2017 and 2021, Coinbase captured the top spot around the market peak.
Even earlier this year, when BTC hit a new ATH, Coinbase went on to take its place among the top downloaded apps.
But as of right now, Coinbase is sitting at 429th place among all apps and 30th in finance apps, as per @CoinbaseAppRankBot. This isn’t too far off Coinbase’s lowest level of the year at about 500. This clearly shows a lack of retail interest.
Then there are transfer sizes below $100,000, which are typically considered retail volume and anything above goes under the institutional category. The data from the past three bull markets show retail volume peak tends to coincide with the top of the bull run. And the total retail transfer volume is currently half of what was seen in the 2024 peak.
Another indicator we can look at is short-term Bitcoin holders, which are investors who bought BTC within the past 155 days. This group tends to buy BTC as the price starts to climb, so they basically chase the market. Historically, the price tops tend to correlate with the high STH supply, too.
This time, the rally in Bitcoin’s price came alongside a decline in STH supply. This suggests that BTC hasn’t peaked yet.
We can also look at Bitcoin fees, which are currently at cycle lows. During the euphoria stage of the bull market, when prices tend to top, speculative activity surges significantly which ends up sending fees to astronomical levels. So far, this is not the case in Bitcoin or Ethereum.
However, it’s notable that activity in the meme sector has been exploding throughout this year. In a retail-driven sector, new meme coins have rallied an aggregate of above 2,000%. Even old memes are up over 100% YTD.
Retail May Not be, But Institutions are Sure Busy Buying
This year has been particularly a big one for Bitcoin as it finally got Spot Bitcoin ETFs. And with that came institutional money. So far, a total of $18.86 billion has been recorded in cumulative total net inflow while net assets have reached $59.08 bln, as per SoSo Value.
BlackRock (BLK +1.83%) has seen IBIT quickly become the largest among the spot BTC ETFs in the US, both in terms of net assets and cumulative total net inflow. Ever since it was first listed, the fund has had $21.5 billion in net inflows while having $23.23 billion in assets.
Recently, the US Bitcoin ETF sector got another boost as SEC approved options tied to IBIT. The options trading on IBIT is currently awaiting approval from CFTC and OCC and once granted, this development could help increase Bitcoin liquidity. This added ability for retail to speculate and institutions to hedge risk can further bring more activity to the market as well as price appreciation.
Meanwhile, Fidelity has seen its FBTC ETF attract nearly $10 billion in net inflows while having $11.44 bln in net assets.
Ark Invest (ARKK -0.61%) has seen ARKB accrue $2.71 bln in total net amount flowing into its ETF since getting listed, while Bitwise’s BITB had $2.14 bln. As for net assets, ARKB has $3.20 bln and BITB has $2.50 bln.
Unlike these Bitcoin funds, which captured billions of dollars, the other ETFs haven’t yet breached the billions-dollar mark. Since they started trading, VanEck’s HODL has recorded $650.13mln in inflows, Valkyrie’s BRRR got $533mln, Franklin Templeton’s EZBC captured $422mln, Invesco’s BTCO $370.62mln, and WisdomTree’s BTCW only received $214.64mln. Then there’s Hashdex’s DEFI with $66.96K in inflows.
There is another one; Grayscale (GBTC), which is actually in 2nd place with just over $14bln in net assets. However, the net inflows of the digital asset manager are negative $20 bln.
Grayscale may have pioneered public access to Bitcoin via funds but this year it has only suffered losses thanks to having fees as high as 1.50%. However, its Bitcoin Mini Trust with a competitive fee of 0.15% has managed to capture 33,753 BTC.
Interestingly, MicroStrategy (MSTR +4.12%) may soon surpass Grayscale in Bitcoin holdings. Currently, Michael Saylor’s company owns 1.2% (252,220 BTC) of Bitcoin’s total supply, while Grayscale has about 254,000 BTC, which is down from the 620,000 BTC it held prior to the Spot ETF launch in January.
MicroStrategy has over $1bln that it is yet to deploy or announce, which, if used to buy BTC, will place the company as the 5th largest holder of the cryptocurrency, trailing BlackRock, Binance, Satoshi Nakamoto, and Coinbase.
Now, if we look at the current picture; BTC Spot ETFs in the US have been continuing their positive streak for a few days now.
According to crypto asset manager CoinShares, digital asset funds recorded $1.2 billion in inflows last week. This wasn’t only the third consecutive week of inflows but the largest since the week ended July 19.
The US-based funds accounted for the vast majority (97.5%) of these inflows with Bitcoin responsible for $1 bln of them. However, things haven’t completely turned around as trading volume hasn’t yet recovered, rather they declined a bit.
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What About ETH Though?
All the massive inflows show a revival of investor confidence in Bitcoin. As for Ethereum, some renewed interest is starting to appear as well. For now, though, it’s pretty subdued, with the price remaining disappointing enough to capture any substantial traction.
Trading at $2,619, ETH/USD is still down 46.2% from its $4,880 peak hit in Nov. 2021. Meanwhile, ETHBTC is at 0.04119 after hitting a new low this year at 0.0383 a couple of weeks ago.
Unlike Bitcoin, the price of Ether witnessed a decline of 24.19% in Q3. This drop came in due to a red July (-5.88%) and August (-22.21%) though September did bring some greens (+3.56%) for the second-largest cryptocurrency. Much like Bitcoin, October is also a positive month for ETH, having an average return of 5.28%.
Now, when it comes to institutional flow for Ether, it was finally able to break its five-week losing streak to have $87mln in inflows, as per CoinShares.
As for Spot Ethereum ETF, the cumulative total net inflow for all the funds combined is still in the negative. The funds have had $523.79 million in outflows while their total net assets are $7.14 bln.
However, this isn’t much different from the early days of the Bitcoin Spot ETF when outflows from Grayscale dominated the activity and price action. It’s been just over two months since spot ETH ETF started trading and during this time, Grayscale’s ETHE has had $2.91 bln in cumulative flows. The asset manager still has $4.32 bln in net assets. Its mini Ethereum Trust, however, has seen $294.52mln in net inflows.
Now, let’s talk about actual inflows. BlackRock is also in the lead here, with its ETHA capturing $1.15 bln in cumulative net inflows and having $1 bln in net assets.
Talking about the “underwhelming” performance of ETHA compared to its Bitcoin ETF, BlackRock’s head of digital assets, Robert Mitchnick said there’s a narrative challenge with the asset. “With ETH, I think the investment story and narrative is a bit less easy for a lot of investors to digest,” said Mitchnick at the Messari Mainnet conference, as a result the company is focused on educating its clients.
After BlackRock comes Fidelity’s FETH with $478.64 mln in net inflows, which is followed by Bitwise’s ETHW at $326.68 mln, then comes VanEck’s ETHV with $66.23 mln, Franklin Templeton’s EZET seeing $35.31mln, Invesco’s QETH recording $22.75 mln, and finally 21Shares’ CETH capturing $13.55mln in inflows.
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So, Bullish Times are Ahead, Get Prepared!
Bitcoin price has been enjoying green when the latest weakness made its presence, which has been due to perpetual funding rates for Bitcoin futures rising to levels seen right before the selloff in late July.
But while in the near-term, BTC may be overbought and prices may drop, the market is believed to be preparing for its ultimate bull run that tends to give explosive returns.
According to a recent survey, 63% of crypto investors are preparing for potential gains in October, with 50.4% seeing the US Presidential Election as a positive catalyst. More than half of investors are also expecting BTC to hit $80,000 during this time.
So, with the growing interest in cryptocurrency, as evident from the uptick in Google search trends, in addition to increasing institutional adoption, IBIT options approval, FTX repayment, October seasonality, and government’s monetary easing promising the injection of fresh capital in the market, a perfect storm has been created for higher prices. And once the ATH is breached, there’s strong potential for BTC to make its way toward $100K!
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